Belgian federal government strengthens its financial position in the KBC group

The KBC group and the Belgian federal government reached an agreement, on Monday, 27 October 2008, in a bid to strengthen the bank insurer's capital base by Euro 3.5 billion. The capital injection will boost the bank's Core Tier-1.

The government has taken this action not because of KBC's shortage of liquid assets and/or solvency but because of new market expectations calling for a strengthening of the group's own resources.

The agreement the government has concluded with the  KBC is based on the model the Dutch government adopted last week, involving  a Euro 10 billion  infusion to boost the  ING group's capital position.

In exchange for the capital injection, the Belgian government will obtain:

• a high yield with a guaranteed repayment of the investment should KBC take the initiative towards this end,
• the right to have two representatives serving on the group's board of governors, and be represented in the audit, remuneration and appointment committees.

The government intervention follows on from earlier actions seeking to stabilise the financial sector, safeguard citizens' savings and guarantee continuing credit activities throughout the Belgian economy.